David Cameron today outlined his plans to drive economic growth in the private sector in the midst of big public spending cuts.

The government is relying on the private sector to take up the slack against a background of wide-ranging spending cuts and job losses in the public sector. In Manchester, on the latest stop of his regional tour on jobs and growth, the prime minister said the government was working to make the next decade "the most dynamic and entrepreneurial in our history".

Cameron said the government was investing in big industries such as tourism, green energy and pharmaceuticals but also providing incentives to smaller businesses and encouraging investment beyond the south-east.

"In the end it's not us in Whitehall who will create growth, but you in your offices, your shops and your factories," he said.

"But you need some very basic things from us to help create wealth and jobs."

The prime minister was accompanied by Lord Heseltine, chair of the £1.4bn regional growth fund, which will provide funds for areas of the UK affected by public spending cuts.

Cameron pointed to the Mersey Gateway, the rollout of superfast broadband, high speed rail and Crossrail as some of the big ticket projects the government was investing in and said the government was working to strengthen high-growth industries.

But he also said the government was "laying out the red carpet" for smaller companies, creating an "entrepreneur visa", nurturing small clusters of innovative companies and web start-ups, expanding the new enterprise allowance, as well as cutting bureaucracy, a favourite bugbear of the Tories.

"If you look at where growth has come from in recent years, you see that it's the small innovative companies that hold a lot of the potential," he said.

The prime minister said it was crucial to make sure growth was balanced across the UK as around half of growth had been concentrated in London and its surrounding regions over the past decade.

He rejected the idea that rebalancing amounted to "making banking weaker or the City of London smaller. You do it by making other regions and industries stronger".

That would be achieved through powerful mayors, a network of technology and innovation centres, new local enterprise partnerships and the regional growth fund, said the prime minister, citing the example of a local enterprise partnership he visited in the Wirral this morning.

Cameron said that part of the government's role to boost growth was to restore confidence in the economy and he said confidence was returning thanks to the actions it has taken to eliminate the national deficit.

"Of course government has got to pay down its debts in a way that helps growth rather than hinders it," said Cameron.

"That's why we're making cuts to welfare but protecting science."

He defended the increase in VAT in similar terms, arguing that it would have a lesser impact on growth than increasing national insurance, Labour's preferred option.

"There are no short-cuts to economic recovery, and I don't promise that the road ahead will be an easy one," said Cameron.

"But if the people of this country pull together, if central government, local government, business and communities work together, then I am confident that we can have strong growth, we can build a more prosperous and more fair economy."